CFS Retail raises $540m for DFOs

CFS Retail Property Trust
has firmed its position as one of Australia’s leading landlords, securing four Direct Factory Outlet centres backed by an oversubscribed $540 million capital raising.

The deal, flagged earlier in the week by The Australian Financial Review, is a slight reprieve for struggling vendor Austexx, which has been juggling a staggering $1 billion in debt.

The trust will acquire Sydney’s DFO Homebush, a 50 per cent interest in DFO South Wharf in Melbourne’s Docklands, and DFOs in Essendon and Moorabbin in Victoria for $498 million on an initial yield of 8.26 per cent.

The South Wharf transaction is subject to the Plenary Group, a minority shareholder in the South Wharf project, amping up its stake to 50 per cent.

CFS Retail will also own the DFO and Homemaker Hub brand names in Victoria, NSW, Western Australia and South Australia.

The transaction marks a departure for CFS Retail, which usually invests in large regional and sub-­regional shopping centres like Chadstone in Melbourne or Chatswood Chase in Sydney.

But CFS Retail fund manager Michael Gorman said the DFO centres provided an opportunity to strengthen relationships with retailers, particularly those at the high end, by providing an additional distribution channel.

“This is a unique opportunity to enter an increasingly important, yet immature retail format and sub­sector in Australia," he said.

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“We are pleased to have been able to negotiate this acquisition, while retaining a strong balance sheet, Mr Gorman said.

“The DFO centres reinforce the trust’s position as one of Australia’s leading retail real estate owners and are complementary to [CFS Retail’s] existing strategy and portfolio," Mr Gorman said.

CFS Retail picked the eyes out of the Austexx portfolio, choosing not to acquire DFO centres in Cairns, Jindalee and Brisbane Airport in Queensland and in Canberra.

Austexx also still owns a former DFO centre on Melbourne’s Spencer Street.

DFO was founded by Toorak businessmen
David Goldberger
and
David Wieland
, with Australian Competition and Consumer Commission chairman
Graeme Samuel
behind the scenes as an investor. Neither Austexx chief executive Geoff Porz nor Mr Samuel would comment on Friday.

CFS Retail said the DFO assets were being acquired “unencumbered with no residual liabilities to the vendor, Austexx, or to its lenders".

“This is a significant milestone for CFS Retail," Colonial First State Global Asset Management’s head of property, Darren Steinberg, said.

“It provides investors with exposure to a retail format which management expects, based on overseas experience, can achieve sales growth in excess of regional and sub-regional shopping centres over the medium term," he said.

The capital raising is at a fixed price of $1.86 per unit, a discount of 4.6 per cent to CFS Retail’s closing price on September 21.

Goldman Sachs, Macquarie Capital Advisers and CBA Equities are joint lead managers on the $540 million institutional placement.

A unit purchase plan will be offered to eligible Australian and New Zealand unit holders subsequent to the institutional placement, with expectations of raising between $5 million and $10 million